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KPMG’s Week in Tax: 22 - 26 August 2016

KPMG’s Week in Tax: 22 - 26 August 2016

Related content

Transfer Pricing and BEPS

United States: The U.S. Treasury Department released a “white paper” outlining concerns with the approach of the European Commission and its state aid investigations of transfer pricing rulings issued by tax authorities of certain EU Member States for U.S.-based multinational entities.

Poland: A summary of the results of tax audits conducted in the first half of 2016 reveals an increase in the number of transfer pricing audits and increased tax assessments.

Poland: A decision of the Supreme Administrative Court concludes that cash-pooling arrangements are loans, and the transfer pricing documentation rules apply.

Liechtenstein: The OECD announced that Liechtenstein has filed its instrument of ratification of agreements providing for the automatic exchange of country-by-country (CbC) reports under the base erosion and profit shifting (BEPS) project.

OECD: The OECD published the public comments received on the conforming amendments to Chapter IX of the OECD Transfer Pricing Guidelines.

Asia Pacific

Taiwan: A proposal being considered would amend the VAT rules regarding foreign e-commerce providers that sell online to Taiwan individuals, to require these online sellers located outside Taiwan to register and pay VAT in Taiwan.

Australia: A KPMG discussion paper discusses long-term issues and their impact on the Australian tax system.

Australia: A recent court case examines the definition of royalties for tax purposes.

Indonesia: Changes to the Indonesian Financial Accounting Standards (SAK) effective for financial years beginning on or after 1 January 2016 have tax implications.

India: A tribunal held that software development services that required certain intellectual skill and that were dependent on the individual characteristics of the person pursuing software development, qualified as professional services under provisions of the income tax treaty with the United States.

Myanmar: The Central Bank issued guidance concerning approval for offshore loans or loans made from abroad.

Africa

Nigeria: There are potential tax implications of an accounting change with respect to leases. The International Financial Reporting Standard (IFRS) 16 on leases will apply to all financial statements prepared for periods beginning on or after 1 January 2019, and will replace the existing International Accounting Standard (IAS) 17. It is uncertain what implications these changes will have on the taxation of leases.

Americas

Barbados: The government’s financial statement and budgetary proposals for 2016 include tax provisions such as a proposed rate increase to the bank asset tax, a tax amnesty program, and a duty-free zone.

UK: HM Revenue & Customs (HMRC) released a revised schema, v2.0, to be used for all automatic exchange of information (AEOI) reporting beginning 1 January 2017—for purposes of the common reporting standard (CRS), the UK Crown Dependencies & Overseas Territories (CDOT), and the FATCA reporting regimes.

South Africa: The South African Revenue Service issued a draft list of “frequently asked questions” (FAQs) as CRS guidance. A “briefing note” was also issued for comments that are due on or before 2 September 2016.

United States

The Ninth Circuit affirmed a taxpayer-favorable decision of the U.S. Tax Court that the taxpayers-builders were entitled to use the completed contract method of accounting under section 460 for reporting income and loss from the sales of housing development projects, and that the Tax Court did not clearly err in determining that the home sale contracts included certain development amenities and were not, as asserted by the IRS, limited simply to the house and the lot on which the house sat.

Rev. Proc. 2016-47 provides rules for waiver of the 60-day rollover requirement from one retirement plan or individual retirement arrangement (IRA) into another plan or IRA by providing a “self-certification procedure” for taxpayers to use in claiming rollover treatment.

The U.S. Tax Court found that because the taxpayer had not transferred “all substantial rights” to certain pharmaceutical technology, the royalties received by the taxpayer constituted ordinary income.

An IRS “practice unit” (guidance for IRS personnel) publicly released this week concerns taxation on the disposition of a U.S. real property interest (USRPI) by foreign persons.

Republican members of the House Ways and Means and Senate Finance committees reiterated in a letter to Treasury Secretary their concerns about the effects of proposed regulations under section 385 (also referred to as the “debt-equity” regulations).

The IRS issued a correction on the enhanced oil recovery inflation adjustment factor.

Indiana’s tax court held that a taxpayer (a scrap steel producer) qualified for manufacturing exemptions and, thus, was entitled to a refund of sales and use taxes remitted on certain equipment purchases.

The Massachusetts Supreme Judicial Court (the highest court) held that a taxpayer must include certain loans in its Massachusetts property factor, and that the inclusion of these loans under the apportionment regime did not violate the internal consistency test.

The Virginia Tax Commissioner ruled that a taxpayer providing subscription-based cloud computing services was not required to pay sales or use tax on its purchase or use of software or required to collect tax from its clients because all sales and use of the software occurred over the cloud, and no software was delivered in tangible form (under a longstanding policy that the sale of software delivered electronically or downloaded from the cloud does not constitute the sale of tangible personal property).

Rev. Proc. 2016-44 sets forth safe harbor conditions under which a management contract does not result in private business use or cause the modified private business use test under section 145(a)(2)(B) to be met.

The priority guidance plan for 2016-2017 includes exempt organization projects that the IRS and Treasury Department intend to work on during the 12-month period ending 30 June 2017.

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